![\"TruePoint](\"https:\/\/www.insuringky.com\/blog\/wp-content\/uploads\/2018\/06\/Standaes-New-Transparent-logo-1-Slender-300x74.png\"){kind=logo}
\u00a0\u00a0![\"Key](\"https:\/\/www.insuringky.com\/blog\/wp-content\/uploads\/2018\/07\/zzzzJust-term-300x75.jpg\")
<\/p>\n\u00a0\u00a0<\/p>\n
<\/p>\n
<\/p>\n
Coinsurance is a term used in the insurance industry that refers to the sharing of risk.\u00a0 Depending on the line of business, coinsurance can have different meanings.<\/p>\n
When used in relations to health care insurance, coinsurance refers to a pre-agreed cost-sharing arrangement.\u00a0 After the insured has met their\u00a0deductible, coinsurance defines the cost-sharing split between the insurer and the insured up to a certain threshold.<\/p>\n
<\/p>\n
In the Property & Casualty insurance sector, coinsurance can be used to identify the spread of risk between two insurance companies.\u00a0 It is also used to establish limits for buildings and other property (primarily commercial.)\u00a0 While the usage is somewhat counter-intuitive, the process is designed in the best interest of the insured.<\/p>\n
Typically you will see the insurance clause in a commercial property policy set at 100% coinsurance, 90% coinsurance, and 80% coinsurance. At first blush, it would appear that 100% coinsurance was the most conservative choice why at 80% coinsurance\u00a0the insured might be exposed to 20% of the loss.\u00a0 THIS IS INCORRECT.<\/p>\n
At 100% coinsurance, the insured has coverage up to the limit stated in the policy.\u00a0 That’s okay, right? It’s\u00a0\u00a0okay until the replacement cost exceeds the limit.\u00a0 Then the insured is on the hook for the difference.<\/p>\n
![\"Return](\"https:\/\/www.insuringky.com\/blog\/wp-content\/uploads\/2018\/07\/click-to-return-to-home-page-300x270.jpg\")
<\/a> estimate that is too low.\u00a0 An 80% coinsurance clause gives the additional protection.\u00a0 At 80% coinsurance, the limit on the structure is now effectively 125% (100\/80) of the stated value.<\/p>\n![\"copyrighted](\"https:\/\/www.insuringky.com\/blog\/wp-content\/uploads\/2018\/07\/ALL-RIGHTS-RESERVED-300x49.jpg\")
<\/p>\n